Assessing the impacts of government environmental policies on the small and medium-sized firm's performances in Korea and China

Purpose This paper aims to examine which role governments can play in facilitating the small and medium-sized enterprises (SMEs)' environmental capabilities in a global marketplace. It also investigates whether the extent of the impact of government intervention on firm performance varies depending on country-specific policies. Design/methodology/approach The authors develop a series of hypotheses that are predicated on the ecological modernization theory and the institutional theory. To test those hypotheses, the authors collected cross-national data reflecting both Korean and Chinese SME practices and then used the structural equation model. In addition, the authors utilized cross-validation techniques for methodological rigor. Findings A series of hypotheses test results revealed that government intervention had a positive impact on the MNF's environmental innovation capabilities and technological innovation capabilities. In addition, the authors discovered that SMEs' reaction to government intervention had a mediating effect between government intervention and the SME's performance. This discovery verifies the ecological modernization and institutional theories. Originality/value This is one of the few studies that conducted cross-cultural analyses of two different nations with contrasting government structures (i.e. capitalistic versus socialistic).